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German Bonds Rise

German Bonds RiseGerman Bonds Rise

Germany’s 10-year government bonds advanced for a second week as the European Central Bank’s debt-purchase program helped push yields on the euro area’s benchmark securities to record lows.

With the ECB committed to buying 60 billion euros ($64 billion) a month of fixed-income securities, investors are finding themselves in competition with the central bank to get hold of the bonds. The crunch pushed up prices so far that German notes due in as many as eight years dropped below zero for the first time this week, Bloomberg reported.

And as yields on shorter maturities drop, investors are being pushed into “longer-maturity, less liquid or lower-quality assets,” Michael Story, London-based global product manager at Pacific Investment Management Co., wrote in a posting on the firm’s website.

Germany’s 10-year yield fell four basis points, or 0.04 percentage point, this week to 0.16 percent at the 5 p.m. London close on Friday. The yield touched 0.139 percent on Thursday, the lowest since Bloomberg began compiling the data in 1989. Its five-year average is 1.81 percent.

The price of the 0.5 percent bund due in February 2025 rose 0.385, or 3.85 euros per 1,000-euro face amount, to 103.365.

The nation’s eight-year yield was at 0.01 percent after slipping to minus 0.005 percent on Thursday. A negative yield means investors buying the securities would get back less than they paid when the debt matures in 2023.

 

Financialtribune.com